Brazil’s Tax Reform will transform the country’s tax system, bringing challenges and opportunities for companies across all sectors. With the transition set to begin on January 1, 2026, it is essential to understand the impacts on business areas and, especially, on enterprise management systems such as SAP, to ensure tax compliance and operational efficiency.
What is the Tax Reform?
Considered one of the most significant fiscal transformations in recent decades, this reform aims to simplify Brazil’s tax system, making it more efficient and transparent. It will replace outdated taxes with more modern models that promise to reduce fiscal complexity, facilitate compliance with legal obligations, and boost economic competitiveness.
Key changes include:
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Contribution on Goods and Services (CBS): will replace PIS and Cofins, simplifying the collection of taxes on goods and services at the federal level.
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Tax on Goods and Services (IBS): will unify ICMS (state) and ISS (municipal), consolidating taxes into a single calculation base applicable to states and municipalities.
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Selective Tax (IS): created to replace part of the IPI, it will apply to specific products such as cigarettes and beverages, functioning as a regulatory instrument.
Implementation will occur gradually until 2033, allowing companies and governments to adapt to the new model without major operational disruptions.
Impacts of the Tax Reform on SAP systems
The transition to the new tax system will bring operational and technological challenges for companies using SAP systems. Key points include:
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Upgrade to SAP S/4HANA: SAP’s most modern solution is ready to meet the new fiscal requirements imposed by the reform, including Split Payment and adaptation to new taxes (CBS and IBS). ECC support will be discontinued in 2027, requiring early planning.
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Split Payment: part of the payment will be automatically directed to the tax authorities responsible for collecting and managing taxes at the federal, state, or municipal level. This mechanism creates a direct link between the tax document and the payment method used, promoting greater transparency and efficiency in tax collection.
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Adaptation of internal processes: systems must be configured to correctly calculate the new taxes and comply with non-cumulative rules. In addition, adjustments to XML layouts will be necessary to reflect the new legal requirements.
==With the end of SAP GRC (Governance, Risk and Compliance) support on December 31, 2025, replacing it with DRC (Document and Reporting Compliance) becomes essential==. This enhanced solution offers features such as reports adapted to new fiscal formats and better integration with regulatory authorities, ensuring tax compliance efficiently.
SAP DRC: the solution for compliance in the new tax landscape
SAP DRC (Document and Reporting Compliance) was designed to replace SAP GRC (Governance, Risk and Compliance) and meet the requirements of the tax reform with more modern and integrated features. Its main benefits include:
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Cloud-based: automatic updates and flexibility for regulatory changes.
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Split payment: automated payment management with direct collection to the tax authorities.
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Modern tax reports: layouts adapted to new legal requirements.
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Integration with tax authorities: greater transparency and efficiency.
==The transition from GRC to DRC is an essential step for companies that want to be prepared for the new tax reform requirements==. DRC not only replaces GRC but also expands tax compliance capabilities, ensuring organizations are aligned with regulations more efficiently and flexibly.
SAP ECC: the role and challenges of the tax reform
SAP ECC (ERP Central Component) has played a fundamental role for years in managing business and tax processes. However, with the arrival of the tax reform and evolving technological demands, this solution is beginning to face significant limitations:
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Need for complex customizations to handle new taxes such as CBS and IBS.
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Lack of native functionalities to meet requirements such as Split Payment.
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ECC support will be discontinued in 2027, requiring planning for migration to S/4HANA.
While ECC can still meet some short-term demands, its infrastructure no longer keeps pace with the complexity of new tax obligations. Companies using this solution should plan their upgrade immediately to avoid future risks.
Adaptation strategies for companies with SAP
To prepare for the Tax Reform, it is essential to follow a clear and efficient action plan. Assessing the impacted business processes, such as billing, purchasing, and accounting, will ensure a smooth transition. Additionally, training teams for implementation is also indispensable.
Relying on specialized consulting can make a difference during the transition process. Companies like INSI offer support in migrating and customizing SAP systems, assisting in the transition to the new tax model. Steps include environment assessment, impact analysis, required customizations, testing, and continuous monitoring.
Tax Reform implementation timeline: how to update your SAP solutions by 2033
The reform will be implemented gradually, with the transition of taxes such as ICMS, ISS, PIS, and Cofins to CBS and IBS. By 2033, the rates of the new taxes will be progressively adjusted while the old taxes are reduced or eliminated. This approach allows companies and governments to adapt to the new tax model without major operational disruptions.
In addition to changes in taxes and calculation rules, the Tax Reform will also bring significant technical impacts. One example is the adoption of the new alphanumeric CNPJ model, scheduled for 2026, which will require adaptations in tax systems, electronic documents, and ERP integrations. Companies that anticipate these updates will be better prepared to ensure compliance and operational continuity.
The Tax Reform is a milestone that requires careful preparation, especially for companies using SAP. Updating systems such as S/4HANA and DRC is not just a matter of tax compliance but also an opportunity to modernize processes, increase competitiveness, and ensure long-term operational efficiency.
Count on our specialists to prepare your company for the tax transition.
==Watch the video below to discover how to prepare your company for the tax transition, ensuring tax compliance and operational efficiency:==